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Print

Juniper Networks Reports Preliminary First Quarter 2012 Financial Results

SUNNYVALE, CA--(Marketwire - Apr 24, 2012) - Juniper Networks (NYSE: JNPR)

Q1 Financial Highlights:

  • Revenue: $1,032.5 million, down 6% from Q1'11 and down 8% from Q4'11
  • Operating Margin: 4.6% GAAP; 12.0% non-GAAP
  • GAAP Net Income Per Share: $0.03 diluted
  • Non-GAAP Net Income Per Share: $0.16 diluted, down $0.16 from Q1'11 and down $0.12 from Q4'11

Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three months ended March 31, 2012, which were above the Company's first quarter outlook. The Company also provided its outlook for the three months ending June 30, 2012.

Net revenues for the first quarter of 2012 decreased 6% on a year-over-year basis, and decreased 8% sequentially, to $1,032.5 million.

The Company posted GAAP net income of $16.3 million, or $0.03 per diluted share, and non-GAAP net income of $84.0 million, or $0.16 per diluted share, for the first quarter of 2012. Included in the GAAP diluted earnings per share was a $0.03 cent impact for charges associated with the write-down of an equity investment, restructuring, and other items.

"Our first quarter results reflect solid execution across Juniper," said Kevin Johnson, CEO of Juniper Networks. "We are pleased with initial customer response to our differentiated new products and solutions, which help form the broadest, most robust product portfolio in our Company's history. We are leveraging these innovations to accelerate traction in the marketplace as we continue to change the economics and experience of networking for our customers."

Juniper's GAAP operating margin for the first quarter of 2012 was 4.6% compared to 11.9% in the fourth quarter of 2011, and 16.1% in the prior year first quarter. Non-GAAP operating margin for the first quarter of 2012 was 12.0% compared to 18.6% in the fourth quarter of 2011, and 22.3% in the prior year first quarter.

"Juniper's results in the March quarter reflect our disciplined operational execution," said Robyn Denholm, CFO of Juniper Networks. "We are pleased with the early customer demand for our new products. We expect customers to continue to exercise care in their investment and project deployments near term. We are focused on executing to our strategy while prudently balancing both the long-term and the near-term needs of the business."

Other Financial Highlights
Total cash, cash equivalents and investments as of the first quarter of 2012 was $4,215.8 million, compared to $4,292.4 million as of the fourth quarter of 2011 and $4,083.5 million as of the first quarter of 2011.

Juniper generated net cash from operations in the first quarter of 2012 of $102.3 million, compared to net cash provided by operations of $243.6 million in the fourth quarter of 2011, and $239.7 million in the first quarter of 2011.

Days sales outstanding in accounts receivable ("DSO") was 39 days in the first quarter of 2012, compared to 46 days in the prior quarter and 38 days in the first quarter of 2011.

For the three months ended March 31, 2012, Juniper repurchased 2.4 million shares, at an average share price of $21.75 per share, for a total of $51.6 million, which largely offset stock issued through our employee equity programs.

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the first quarter of 2012, were $82.0 million and $43.4 million, respectively.

Outlook

Looking ahead, we will manage the business assuming the near-term environment requires continued caution. We will remain focused on executing our strategy while maintaining a balanced approach for both the long and near term.

  • Juniper estimates revenue for the second quarter ending June 30, 2012, to be in the range of $1,030 million to $1,060 million.

  • Juniper estimates that its non-GAAP gross margin will be roughly in line compared to the first quarter.

  • Juniper estimates that its non-GAAP operating expenses will be roughly in line compared to the first quarter.

  • Juniper expects its non-GAAP operating margin for the second quarter to be in the range of 12% and 14%.

  • Juniper estimates that its non-GAAP net income per share will range between $0.15 and $0.17 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 29%. This tax rate assumes no renewal of the R&D tax credit.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition related charges, restructuring charges, impairment charges, litigation settlement charges, gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and income tax effect of non-GAAP exclusions. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Change in Segment Reporting
Beginning with our results for the first quarter of 2012, Juniper is aligning the financial reporting of our business segments to the Company's current organizational structure and the Company's focus on our platform and software strategy. Juniper will continue to report its business in two segments, and we will continue to provide revenue by segment, with product details for routing, switching, and security/other as well as services. Juniper will also continue to provide revenue details by geographic region and by market, and the historical amounts for these categorizations have not changed.

In addition to improved operational accountability and management, we believe the change will provide investors with increased financial reporting transparency, as the changes in segment reporting will enable better insight into the market and performance trends driving the Company's business. The two reportable segments are the Platforms Systems Division, or PSD, and the Software Solutions Division, or SSD. A summary showing PSD and SSD 2011 and 2010 quarterly revenues on a basis consistent with our new reporting structure is included in Appendix 1.

Juniper's PSD segment primarily offers scalable routing and switching products that are used in service provider, enterprise, and public sector networks to control and direct network traffic from data centers, core, edge, aggregation, campus, WANs, branch, and customer premise equipment level. Our SSD segment offers solutions that meet a broad array of our customers' priorities, from protecting the users, applications and data on the network to providing network services across a distributed infrastructure.

The PSD segment aligns primarily with the Infrastructure segment as previously reported. However, the PSD segment includes revenues from certain security-related products, such as our branch SRX, branch firewall, and J Series products, which Juniper historically reported in our Services Layer Technologies (SLT) segment. In addition, the PSD segment excludes revenues from other software and services-related products, including Routing Services Software and Mobile Applications (such as MobileNext), which Juniper previously reported in our Infrastructure segment, but which are now reflected in the new SSD segment.

Our PSD segment consists of routing, switching, and security/other products and services. Routing includes products and services from the E, M, MX, PTX, T Series, and ACX (shipping in H2 2012) router families. Switching primarily consists of products and services for EX Series and wireless local area network solutions, as well as QFabric™. Security/other includes products and services from the branch SRX, branch firewall, and J-Series product families, as well as the network application platform, Junos® Space.

Juniper's new SSD segment aligns primarily with the SLT segment as previously reported. However, the SSD segment also includes revenues from other software and services-related products which were previously reported in the Infrastructure segment, including Routing Services Software and Mobile Applications (such as MobileNext). It also excludes the revenues from certain security-related products, such as the branch SRX, branch firewall, and J Series product families, as well as the network application platform, Junos Space, which are now reflected in the new PSD segment.

The SSD segment primarily consists of security/other and routing products and services. Security/other includes High-End SRX services and vGW Virtual Gateways, High-End Firewall virtual private network systems and appliances, secure socket layer virtual private network appliances, intrusion detection and prevention appliances, wide area network optimization platforms, and Junos Pulse. Routing primarily consists of Routing Services Software and Mobile Applications (such as MobileNext).

A table showing revenue by product type within each segment is provided as Appendix 2.

A table showing product detail by business segment is provided as Appendix 3

Under our new reporting structure, segment profitability will be measured by "Contribution Margin," which will reflect segment revenues less those expenses which are directly attributable to (and controlled by) the segment organization. Such expenses would typically include costs of revenue, R&D, direct product marketing, and product lifecycle management. A summary showing 2011 and 2010 segment contribution margins on a basis consistent with our new reporting structure is included in Appendix 4.

Under our new segment reporting structure, there also will be amounts which are not allocated to the segments. These "Corporate Unallocated" amounts represent capabilities that are shared by the segments and managed separately at the corporate level. Corporate Unallocated expenses would typically include costs for global functions such as Sales, Corporate Marketing & Communications, Finance, HR, and the CTO organization. A summary showing 2011 and 2010 Corporate Unallocated amounts on a basis consistent with our new reporting structure is included in Appendix 5.

Conference Call Web Cast
Juniper Networks will host a conference call web cast today, April 24, 2012, at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.

To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call ten minutes prior to the scheduled conference call time. The web cast replay of the conference call will be archived on the Juniper Networks website.

About Juniper Networks
Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking. Additional information can be found at Juniper Networks (www.juniper.net).

Juniper Networks and Junos are registered trademarks of Juniper Networks, Inc. in the United States and other countries. The Juniper Networks and Junos logos and QFabric are trademarks of Juniper Networks, Inc. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

Statements in this release concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating results, and overall future prospects are forward-looking statements that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending and spending by communication service providers; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation; and other factors listed in Juniper Networks' most recent report on Form 10-K filed with the Securities and Exchange Commission. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information in this release in the event facts or circumstances subsequently change after the date of this press release.

Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the discussion below.

Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
2012 2011
Net revenues:
Product $ 771,873 $ 877,440
Service 260,625 224,172
Total net revenues 1,032,498 1,101,612
Cost of revenues:
Product 280,629 265,746
Service 117,814 99,981
Total cost of revenues 398,443 365,727
Gross margin 634,055 735,885
Operating expenses:
Research and development 269,602 261,979
Sales and marketing 257,719 246,291
General and administrative 54,666 44,924
Amortization of purchased intangible assets 1,178 1,544
Restructuring and other charges 2,039 (347 )
Acquisition-related and other charges 1,142 4,101
Total operating expenses 586,346 558,492
Operating income 47,709 177,393
Other (expense) income, net (24,431 ) (6,462 )
Income before income taxes and noncontrolling interest 23,278 170,931
Income tax provision 7,008 41,271
Consolidated net income 16,270 129,660
Adjust for net loss (income) attributable to noncontrolling interest - 90
Net income attributable to Juniper Networks $ 16,270 $ 129,750
Net income per share attributable to Juniper Networks common stockholders:
Basic $ 0.03 $ 0.24
Diluted $ 0.03 $ 0.24
Shares used in computing net income per share:
Basic 527,186 530,789
Diluted 533,683 548,825
Juniper Networks, Inc.
Preliminary Net Revenues by Reportable Segment
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Platform Systems Division:
PSD Products:
Routing 457,579 582,818
Switching 123,523 100,621
Security/Other 46,274 51,401
Total PSD Products $ 627,376 $ 734,840
PSD Services 196,818 163,798
Total Platforms Systems Division Revenue $ 824,194 $ 898,638
Software Solutions Division:
SSD Products
Security/Other 122,681 116,605
Routing 21,816 25,995
Total SSD Products $ 144,497 $ 142,600
SSD Services 63,807 60,374
Total Software Solutions Division Revenue $ 208,304 $ 202,974
Total Revenue $ 1,032,498 $ 1,101,612
Juniper Networks, Inc.
Preliminary Net Revenues by Product
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Routing $ 479,395 $ 608,813
Switching 123,523 100,621
Security/Other 168,955 168,006
Services 260,625 224,172
Total $ 1,032,498 $ 1,101,612
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Americas $ 531,347 $ 581,615
Europe, Middle East, and Africa 307,066 299,851
Asia Pacific 194,085 220,146
Total $ 1,032,498 $ 1,101,612
Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Service Provider $ 685,609 $ 742,177
Enterprise 346,889 359,435
Total $ 1,032,498 $ 1,101,612
Juniper Networks, Inc.
Preliminary Share-Based Compensation by Category
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Cost of revenues - Product $ 1,117 $ 948
Cost of revenues - Service 5,220 3,919
Research and development 25,791 22,330
Sales and marketing 21,911 13,226
General and administrative 10,968 8,616
Total $ 65,007 $ 49,039
Juniper Networks, Inc.
Preliminary Share-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
Three Months Ended
March 31,
2012 2011
Cost of revenues - Product $ 12 $ 271
Cost of revenues - Service 34 835
Research and development 126 3,074
Sales and marketing 176 3,386
General and administrative 31 419
Total $ 379 $ 7,985
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended
March 31,
2012 2011
GAAP Cost of revenues - Product $ 280,629 $ 265,746
Share-based compensation expense C (1,117 ) (948 )
Share-based compensation related payroll tax C (12 ) (271 )
Amortization of purchased intangible assets A (6,095 ) (5,198 )
Acquisition-related and other charges A,B -- (960 )
Non-GAAP Cost of revenues - Product 273,405 258,369
GAAP Cost of revenues - Service 117,814 99,981
Share-based compensation expense C (5,220 ) (3,919 )
Share-based compensation related payroll tax C (34 ) (835 )
Non-GAAP Cost of revenues - Service 112,560 95,227
GAAP Gross margin - Product 491,244 611,694
Share-based compensation expense C 1,117 948
Share-based compensation related payroll tax C 12 271
Amortization of purchased intangible assets A 6,095 5,198
Acquisition-related and other charges A,B -- 960
Non-GAAP Gross margin - Product 498,468 619,071
GAAP Product gross margin as a % of product revenue 63.6 % 69.7 %
Share-based compensation expense as a % of product revenue C 0.2 % 0.2 %
Share-based compensation related payroll tax as a % of product revenue C -- % -- %
Amortization of purchased intangible assets as a % of product revenue A 0.8 % 0.6 %
Acquisition-related and other charges as a % of product revenue A,B -- % 0.1 %
Non-GAAP Product gross margin as a % of product revenue 64.6 % 70.6 %
GAAP Gross margin - Service 142,811 124,191
Share-based compensation expense C 5,220 3,919
Share-based compensation related payroll tax C 34 835
Non-GAAP Gross margin - Service $ 148,065 $ 128,945
GAAP Service gross margin as a % of service revenue 54.8 % 55.4 %
Share-based compensation expense as a % of service revenue C 2.0 % 1.7 %
Share-based compensation related payroll tax as a % of service revenue C -- % 0.4 %
Non-GAAP Service gross margin as a % of service revenue 56.8 % 57.5 %
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended
March 31,
2012 2011
GAAP Gross margin $ 634,055 $ 735,885
Share-based compensation expense C 6,337 4,867
Share-based compensation related payroll tax C 46 1,106
Amortization of purchased intangible assets A 6,095 5,198
Acquisition-related and other charges A,B -- 960
Non-GAAP Gross margin 646,533 748,016
GAAP Gross margin as a % of revenue 61.4 % 66.8 %
Share-based compensation expense as a % of revenue C 0.6 % 0.4 %
Share-based compensation related payroll tax as a % of revenue C -- % 0.1 %
Amortization of purchased intangible assets as a % of revenue A 0.6 % 0.5 %
Acquisition-related and other charges as a % of revenue A,B -- % 0.1 %
Non-GAAP Gross margin as a % of revenue 62.6 % 67.9 %
GAAP Research and development expense 269,602 261,979
Share-based compensation expense C (25,791 ) (22,330 )
Share-based compensation related payroll tax C (126 ) (3,074 )
Non-GAAP Research and development expense 243,685 236,575
GAAP Sales and marketing expense 257,719 246,291
Share-based compensation expense C (21,911 ) (13,226 )
Share-based compensation related payroll tax C (176 ) (3,386 )
Non-GAAP Sales and marketing expense 235,632 229,679
GAAP General and administrative expense 54,666 44,924
Share-based compensation expense C (10,968 ) (8,616 )
Share-based compensation related payroll tax C (31 ) (419 )
Non-GAAP General and administrative expense 43,667 35,889
GAAP Operating expense 586,346 558,492
Share-based compensation expense C (58,670 ) (44,172 )
Share-based compensation related payroll tax C (333 ) (6,879 )
Amortization of purchased intangible assets A (1,178 ) (1,544 )
Restructuring and other charges B (2,039 ) 347
Acquisition-related and other charges A,B (1,142 ) (4,101 )
Non-GAAP Operating expense $ 522,984 $ 502,143
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended
March 31,
2012 2011
GAAP Operating income $ 47,709 $ 177,393
Share-based compensation expense C 65,007 49,039
Share-based compensation related payroll tax C 379 7,985
Amortization of purchased intangible assets A 7,273 6,742
Restructuring and other charges B 2,039 (347 )
Acquisition-related and other charges A,B 1,142 5,061
Non-GAAP Operating income 123,549 245,873